UPDATES

Korea’s Tax Law Reform Proposals for 2023 – Amendments related to Customs Law

Protection of Taxpayer’s Right

Expand duty* exemption range during amended declaration

*additional tax on an understated declaration

Expand duty exemption range for amended declaration filed after period designated for tax revision(6 month from date of declaration and payment)

Purpose of the amendment: To encourage immediate tax correction

Implementation date: Applied for tax amendments to be filed after January 1st2024.

Abolition of rules related to inspection fee for import/export goods

No inspection fee will incur even for inspections done by customs officers in place other than inspection warehouse managed by the Customs office.

(Current) Basic inspection fee = inspection duration x KRW 2,000 + actual cost incurred

Purpose of the amendment: Ease the burden of importing/exporting companies.

Implementation date: Applied for inspection cases occurring after January 1st2024

Tighten management on Tax Avoidance

Implementation of rules to prevent circumvention

Purpose of amendment: Improve effectiveness of the anti-dumping duty application by eliminating circumvention

Implementation date: Applied for audit cases occurring after January 1st2025.

Add list of cases subjected for information disclosure

Amount of evaded customs duty and other personal information will be disclosed for those who have evaded more than 200M Korean won and convicted for evasion of customs duties, etc.

Purpose of amendment: Improve legal awareness

Implementation date: For those convicted after the enforcement date of the law

Strengthen process to prevent illegal act during application for Approved Exporter

Establishment of legal basis for penalty to be applied for illegal act(document manipulation etc.) happening during application for approved exporter (Impose fine not exceeding 20M Korean won)

Purpose of revision: Improve reliability of Exporter approval system

Implementation date: For those application submitted after January 1st2024

Other related Amendments

Added exception rule on Effective period for Taxation

If the fact of lending the name is confirmed as a result of appeal or litigation (1year from the date of decision or judgement)

Added reason for data request associated to Related Party

Data associated to Related party can be requested during Customs Audit

System improvement: Added items subjected for Specific Use Tariff

Expand scope for application: Added Anti-dumping/Countervailing/Retaliatory/Beneficial Duty

No separate application process is required for those items designed to be used for specific purpose in which the Head of the Customs office confirmed that such items cannot be used for other purpose.(Post Management is also exempted)

Improve process on Advance Classification Ruling

The Commissioner of Customs can make decision on product classification even without application for Advance classification ruling

*Official announcement will be issued for those cases which undergo review by the Tariff Classification Committee

Added Proprietors' Disqualification criteria

Crime of lending the title of Bonded Goods caretaker will be added as Proprietors' Disqualification

Establish process for releasing/collecting on-board sample

It would be possible to collect samples from foreign trading ship(foreign goods)

Added reason for Custody

Items imported by delinquent taxpayer* will be subjected for custody

*For cases when roles related to compulsory collection/disposition on default are entrusted to the Head of the customs office according to National/Local Tax Collection Act

Expanded case subjected for penalty during bonded transportation

Using means of transportation other than the declared transportation is prohibited.

Establish exceptional process for bonded transportation using foreign trading ship within international port

Bonded transportation is allowed within international port only during transshipment and goods accepted for export (export declaration filed).

Existing bonded transportation rule will be applied.

Expanded scope for compensation of loss during inspection

Loss occurred on the product packaging and delivery means (Claimed amount: within the domestic market price)

Farmers and fishermen can also apply for FTA support project managed by KCS(Korea Customs Service)

FTA support project were limited to small enterprises but it was expanded to farmers & fishermen

Clarified reasons for exemption of Revision Interests for goods which FTA tariff rate is applied.

Following are the reasons for Revision interest exemption

*When declaration for Tax revision is filed before receiving notification for inspection of origin – with a condition that error on the country of origin document is caused without the fault of the importer.

*When Customs Authorities of the contracting state give no response to the origin clarification request sent by the commissioner or the head of the customs office

AMENDMENTS

Orders on Rewards for Reporters of Smuggling etc. (draft planned)

Regulations on Increasing market access volume (draft planned)

Notification on the administration of Import/Customs clearance of moving goods

(partial amendment)

Foreign Exchange Transaction Act (draft planned)

Enforcement Decree of the Foreign Exchange Transaction Act (draft planned)

Notice on changing classification of Import/Export goods (partial amendment)

Rules on Enforcement of the Customs Act (draft planned)

Notification on handling duty refund for export raw materials (partial amendment)

National Tax Law (draft planned)

OPINION

Review of the ACVA for the method of determining the customs value between related parties, increase of multi-national company’s trading.

ACVA(Advance Customs Valuation Arrangement) has both positive side and negative side for multi-national companies. It has, for multinational corporations, the positive aspect of providing business stability and tax predictability. In other hand, There is a procedural difficulty in that the work is carried out over a long period of time, from application to review, etc., from one year to one year and six months. Applications to utilize the ACVA system in 2021 are generally on the rise, with a total of 182 applications received and 115 decisions made. This is believed to be attributable to the expansion of benefits and system improvements since 2017. In the future, support for customs administration is also required so that multinational foreign companies can actively participate through various efforts such as vitalizing pre-consultation, reducing required documents to be submitted, and shortening processing deadlines. It can be said that it is a system that requires management.